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WWE News
WWE News: Linda McMahon says whether international brand extension is being considered; why WWE makes roster cuts Dec 10, 2008 - 3:52:11 PM
Repeating past statements from WWE's official quarterly conference calls with investors, CEO Linda McMahon said the company continues to focus on the international market as their key growth area.
Whereas domestic business has held at a stagnant-to-steady growth rate, international touring, licensing, TV deals, and merchandising continue to be the company's key area to generate an increasing amount of revenue.
Linda McMahon, who was presenting for WWE at the UBS conference in New York City, was asked about the cost structure of keeping wrestlers under contract and how an international expansion to possibly add another brand would affect the company.
McMahon started by identifying a fixed-cost number WWE prefers to keep in check at all times. That number revolves around 160 "talents" under contract, which includes wrestlers, announcers, valets, FCW developmental wrestlers, or any other "active" personnel.
WWE doesn't like to stray from that number to keep costs fixed, but an international expansion would mean a revised cost structure.
"(There) may come a time to have a separate international tour, but if it does, all of those costs become variable costs," McMahon said.
McMahon then detailed that "active talent" are independent contractors with a flat downside guarantee, but "most of their income" is on a percentage basis through "licensed goods (and) participation in live event and PPV."
Caldwell's Analysis: Two things here. One is that WWE is not going to attempt an international brand extension until the domestic economy turns around, their $20 million cost-cutting measure is implemented, and they can subsequently take the risk of changing their cost-structure to include variable costs for adding international brand expenditures beyond their current Raw, Smackdown, and ECW budgeting.
The second thing is that 160 talent number. I'm drawing the conclusion that when WWE hires on a new developmental wrestler, that means a current WWE "main roster" talent is going to be cut. In a business sense, that essentially means WWE believes they have drawn out the most value they can get out of a wrestler, such as Kenny Dykstra to grab a name out of the air, and they feel more value can be drawn out of a new developmental wrestler two, three, five years down the road.
So, a "main roster" cut means they've given up on drawing value out of a current wrestler and believe future value can be grabbed from a new developmental wrestler in the long-term. It's the old thinking of squeezing enough out of the golden goose until it can't produce anymore, then tossing it in the scrap heap.
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